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TechnoratiGetting the GM Bankruptcy All Wrong
To read the mainstream coverage of the GM bankruptcy, you would think President Obama's main enemy--and indeed the enemy of progress for the whole country--is a unionized labor force in the auto industry.
Good thing Obama and his one-person task force on dismantling the auto industry--31-year-old Yale Law School student Brian Deese are ready to stand up to the automakers and the union, we are told.
David Brooks captures this point of view on the op-ed page of the New York Times Tuesday, saying of the UAW: "This is the union that fought for job banks, where employees get paid for doing nothing. This is the organization that championed retirement with full benefits at around age 50." Well paid, middle-class auto workers with health care benefits and other goodies that are increasingly scarce in today's economy are responsible for the collapse of this huge manufacturing industry, the conventional wisdom goes. Obama, in the deal he worked out with GM, will have to remain vigilant lest workers resist the company's plans to send more jobs to China.
Even more absurd, Brooks criticizes the Obama plan because it "rides roughshod over the current private investors and so discourages future investors. G.M. is now a pariah on Wall Street. Say farewell to a potentially powerful source of external commercial pressure."
Ah, Wall Street, that powerful source of good, solid business sense.
This perspective is complete hogwash. As Congresswoman Marcy Kaptur of Ohio aptly notes, however plagued by problems the auto industry and GM in particular may have been, they did not cause the financial crisis that brought them down. The financial industry did that for us.
Car companies that prepared for the current moment: that made smaller cars, did not resist CAFE standards, did not end up in bankruptcy.
Ralph Nader, Joan Claybrook, and other consumer advocates who support union jobs, warned the UAW not to fight CAFE standards, that to do so was shooting themselves in the foot. Ralph Nader excoriated auto industry executives for their nearsightedness on environmental and safety issues, starting with Lee Iacocca, who called seat belts a "fad."
But whatever its faults, the bottom line is that America needs a strong manufacturing sector in order to recover from its economic woes. We need an economy that makes things. Printing more money and moving around derivative investments won't do it. As my friend Mary Bottari of Public Citizen puts it, contrasting the bank bailout with the GM bankruptcy:
"I am astonished by our willingness to go to the wall for an industry that doesn't make anything and NOT go to the wall for this industry that is the foundation of our economy."
Ralph Nader, in an editorial in the Wall Street Journal this week, urged Congress to take power over the GM bankruptcy deal away from the 31-year-old Deese (whom the New York Times describes in an affectionate profile as having awe-shucks attitude toward his first government job, and as continually shaving an regrowing his beard).
"Has [Deese's] task force conducted any kind of formal or informal cost-benefit analysis on the costs of a GM bankruptcy and excessive closures?" Nader asked on the eve of the closure of 14 GM factories, 7 of the in Michigan, and the immediate loss of 21,00 jobs. Nader noted "social effects of lost jobs (including more than 100,000 dealership jobs alone), more housing foreclosures, the government expense of providing unemployment and social relief, lost tax revenues, supplier companies that will be forced to close, damaged consumer confidence in the GM brand, and impacts on GM's industrial creditors."
And then there is that offshore issue.
"Why is the task force permitting GM to increase manufacturing overseas for export back into the U.S.?" Nader demands in the Wall Street Journal. "Under the GM reorganization plan, the company will rely increasingly on overseas plants to make cars for sale in the U.S., with cars made in low-wage countries like Mexico rising from 15% to 23% of GM sales here. For the first time, GM plans to export cars from China to the U.S. in what is a harbinger of the company's future business model. What is the conceivable rationale for permitting GM to increase manufacturing overseas -- especially in dictatorships, for export back into the U.S. -- when preserving jobs and industry is the avowed goal of this immense taxpayer bailout?"
One of the most irrational effects of the job-export and reimport from China plan is the effect on the environment. Since Obama specifically alludes to environmental goals as part of the plan for GM, and since, aside from the financial crisis, the other major crisis our government is dealing with currently is global climate change, outsourcing American auto manufacturing jobs to China is particularly nuts.
Sensible management of the GM bankruptcy would take into account these issues: the need to grow a viable U.S. manufacturing sector, the need to protect good jobs and benefits in this country, and the need to protect our environment.
That is just the opposite of the pressures Wall Street brings to bear on the auto industry. But look at what those pressures have done for us already.
As Marcy Kaptur put it in an interview I did with her for the forthcoming issue of the Progressive, "In essence, it's a battle between Wall Street and Main Street, between financiers and industrialists. And right now the financiers are winning."
The subprime mortgage crisis, and fraud by banks, precipitated the financial crisis, in Kaptur's view, and the resulting credit crunch is killing legitimate business around the country.
"Credit lines have closed along with bank lending to dealerships, bank lending to people who want to buy a car. So this industry, which is so sales-dependent, took a sales nosedive." Not only is GM bankrupt as a result, but our whole economy is on the rocks, say Kaptur: "Manufacturing used to represent well over 40 percent of this economy. It's now down to 12. Half the economy is unsustainable. And look at what's happening. It's crashing all around us."
Members of Congress who can take that kind of overarching view of the crisis ought to be managing the GM bankruptcy and the fight to re-regulate the financial industry.
21 Comments so far
Show Allat least Michael Moore is happy about GM failing!
If one can believe the information in the movie "Taken for a Ride", it was GM that backed the systematic dismantling of our electric trolly system throughout the country. We are now asked to believe that it is our own best interest to bail out this paragon of industry. I don't know if we have reached "peak oil", but if not it can not be far away. If so, (or when it does come), the concept of single owner automobiles will be drastically rethought. The auto industry and in turn the highway industry will be forced to cede the reigns of corporate power to those who propose going back to a mass transit system using Europe and Japan as models. Though I greatly admire and support Ralph Nader, I do not believe we should prop up an industry with such a short shelf life. Just my opinion, but the US needs an revamping of it's transportation system, not just triage on a sick and dying industry.
As Congresswoman Marcy Kaptur of Ohio aptly notes, however plagued by problems the auto industry and GM in particular may have been, they did not cause the financial crisis that brought them down.
actually, ruthie and marcy, they did. in their failure to provide a quality and competitive product that functioned on a 40mpg diet, the inevitable was bound to happen. of course, not even the most complacent american fathomed it being at their own expense.
"I am astonished by our willingness to go to the wall for an industry that doesn't make anything and NOT go to the wall for this industry that is the foundation of our economy."
mary, mary, certainly you don't believe what you say???
and ruthie, what does shaving and regrowing one's beard have to do with this discussion? or one's qualifications in doing a job? using that line of discourse, one could muse about the shaving and regrowing of a woman's armpit hairs and a connected ability in covering national politics.
one would think that i would have learned by now to not read this sort of nonsense at bedtime.
a-fucking-mazing.
Yep. GM, and Chrysler, were already in deep doo doo before the financial crash. GM has long resisted producing fuel efficient cars. As recently as last year, Bob Lutz, then vice chairman of GM, described global warming as "a crock of shit".
Most do not realize that we have bailed out GMAC through access to government backed 0% financing.
GMAC turns around and "launders" the money through DITECH and makes 6% off its zero cost money.
They can now afford to offer zero percent financing to car buyers to clear inventories while they downsize.
Ford does not have zero cost money
Toyota does not have zero cost money
Honda does not have zero cost money
They cannot compete.
(Unless the Japanese Government helps out)
In orther words, GM puts a 6% tariff on their competitors and the worst run company gains a major advantage.
Who can compete with zero cost money.
And we can borrow the money and debase it through currency manipulation.
Money center banks go long ...Money center banks go short.. They are using zero cost money to make their bets
What could go worng ???
>> What could go wrong??
Their cars... and they do.
The US Federal government taxes workers, spends the taxes to prevent workers across the globe from negotiating for higher wages. It begins a so-called "free trade" or "globalization" policy that reduces tariffs on sweat-shops products to better undercut the wages of Americans. Then it claims its industry fails because Americans negotiated to educate their children, own property, and once in a while even pay for health care.
What is the reward if American workers release these things or retire from unions? Does this not mean they will get to live the good, clean life of workers in Sri Lanka or the Philippines?
Heaven forbid investors should lose money after a few of them stole so fast as to bankrupt their pet system. For fifty years I have heard that investors what workers create because they alone run risks.
Guarantee the pensions, not the Hummers: let the mortgages of GM workers not fail.
Obama - same crap in new improved wrapping.
po thread you are a 1000% wrong they have slaves. its the senate the house and obama!
they say jump they ask ""how high boss" and on and and on...........i'll never buy another
gm product as long as i live.david brooks is another corporate shill as is the ny times.
a friend is a printer there and the times is working overtime to break their printers union!
the times is now longer the paper of record they lost that privilege years ago. long
live the internet!
The union busting movement got its most recent toe-hold when Saint Ronnie Regan (he's with the angels now...) broke PATCO. They just unveiled his commemorative statue, so that tells you how successful those in power have been at convincing the average American that unions are undesirable. And you thought he was remembered for "defeating communism" by defense-spending us into a black hole...
Cameiros
What does that moron Mr. Brooks say about our wonderful politicians getting outrageous healthcare and retirement benefits, while the people they purport to represent get their benefits slashed...?
What if I don't want stock in a car company? Can I opt out?
When Americans started buying vehicles using home equity with payback terms of 15-20 years, the auto makers essentially borrowed their future sales.
Many years ago, people payed cash or took out, at most, a 3-year loan. 5-6 year loans were bad enough but 15-20 years to pay off a vehicle that lasts for 10 years, at best?
Now they're talking about 13 years for GM to make a turn around and for the Government to divest. Compare that number to the equity loan term and there is your answer.
More consumption (if desirable) must come from the growth of wages over expenses, not from borrowing. If wages must stay static to tame inflation, then we must reduce the cost of the big three expenses -- Health Care, Housing, and Transportation. Only then can we have true "economic growth", presuming the planet can support it. (and that's another story...)
"But whatever its faults, the bottom line is that America needs a strong manufacturing sector in order to recover from its economic woes."
Strong manufacturing sector? Just what would you manufacture, and when does the fact that you are using our only planet as the non-returnable source material for your crap become relevant? Ever?
Well, you can't hire slaves in the U.S anymore...
This is very strange that GM is getting bailed out by tax payers. So now I am the proud owner of a car company with an inventory that is worthless, an insurance company that is broke and several banks that won’t lend me a dime. Oh yes lets not forget that the Japanese are making vehicles that are reliable, comfortable, safe and technologically superior to this newly aquired company of mine. Thanks president Obama although you’re decision have not been the best your swagger is worth it.
The last time I checked the planet is giving us all the finger. It doesn't matter if we bail out GM or not since the average american isn't earning enough in wages to purchase a house and a car also anymore. If they could afford the new car they couldn't afford to put gas in it since peak oil is looming it's ugly head again. (who say's they didn't drop world oil prices to manipulate the american elections? Not me.) Your town, city, county, state or federal government cannot afford the asphalt to keep the oversized road network up anyway.
So the bankrupt GM is supposed to produce cars US consumers can't afford with their unemployment checks, to fuel with gas they can't afford, to drive on roads their city can't afford to pave, in order to buy food that's doubled in price, so that they can continue to work no-benefits jobs they hate.
Did I miss something?
The Congress and Wall Street keep writing checks the planet can't cash. The resources to feed the billionaire bloat economy are gone. Printing more cash won't put food on plates or gas in the tank if the planet isn't giving them up.
Why farm-out work to China?
Because they hold the paper on our loan!